The Problem with the Bank of Mom and Dad

Should parents help their children pay for grad school if they can afford it? My parents are divorced, but both are in households considered in the top 1% of the US in terms of income and net worth. After limited financial assistance from them during undergrad, I am getting no help at all for grad school. Am I out of line to expect that I should?

The discussion at AskMetafilter features some outstanding comments, most of which note that “no, you shouldn’t expect your parents to help”. But what do the financial experts say?

In The Millionaire Next Door (my review), authors Thomas Stanley and William Danko devote two entire chapters — 69 pages! — to “economic outpatient care”, the substantial financial gifts some parents give their adult children (and grandchildren). Their research indicates that “the more dollars adult children receive, the fewer they accumulate, while those who are given fewer dollars accumulate more”.

The authors note that some forms of economic outpatient care, including subsidizing an education and funding business ventures, have a strong positive influence on the recipients. (They teach the children “how to fish”.) But most financial assistance simply creates a cycle of dependence:

What is the effect of cash gifts that are knowingly ear-marked for consumption and the propping up of a certain lifestyle? We find that the giving of such gifts is the single most significant factor that explains lack of productivity among the adult children of the affluent.

Stanley and Danko write about four specific ways in which cash gifts to adult children create problems:

Giving encourages more consumption than saving and investing. Stanley and Danko warn about gifts of house down payments, in particular.

Gift receivers in general never fully distinguish between their wealth and the wealth of their gift-giving parents. They believe they are entitled to the things their parents have, and feel resentment if the wealth is given to somebody else.

Gift receivers are significantly more dependent on credit than are non-receivers. They use credit in order to sustain their lifestyle of consumption between gifts.

Receivers of gifts invest much less money than do non-receivers. The authors claim that gift receivers are “hyperconsumers”, only thinking of now. They have come to expect that their financial needs will be met by their parents, so they don’t plan for the future.

Obviously, not everyone who receives financial assistance from their parents will fall into this trap. But often accepting such gifts leads to trouble.

What’s the solution?

If your parents are wealthy, whatever your income (and whatever the level of assistance you receive), always live below your means. Don’t use financial gifts to fund your lifestyle. If you have considered giving your children economic outpatient care, “teach them to fish” instead.

I’ve known people who received financial assistance from their parents or grandparents. Most of these people have struggled with money in some way. They spent too much. They didn’t feel the need to take a job. They put off making financial decisions because there was no need to do so. Last fall, for example, an affluent friend received a $25,000 gift from his grandparents. Rather than invest the money, he bought himself a new car. (There was nothing wrong with his old car.)

I’ve never felt comfortable discussing these issues with friends, but I’ve watched with concern, hoping that they would change course, that they would recognize that their dependence on family money was leading to an unsustainable financial future.

My parents never gave my brothers and me any significant financial assistance, but they did something nearly as damaging. By encouraging the three of us to join the family business when we were young, they prevented us from taking responsibility for our careers. We didn’t have to participate in the workaday world because our places were set aside for us. We didn’t receive cash gifts, but the effects of nepotism were essentially the same. Only recently have the three of us begun to recover from our slow starts and to take responsibility for our careers.

I’m not saying that you shouldn’t take money if a family member offers it to you. But if you do accept such gifts, be smart with the money. Don’t use it to fund consumption. And, unlike the poster at AskMetafilter, never feel that you are obligated to your parents’ money.

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I think paying for tuition is different than receiving a cheque to do whatever with. If your parents can pay and are willing to pay for school, then they can write the cheques out to the university. However, I don’t think anyone should expect their parents to help, no matter their income. If that guy really wants to go to gradschool he can get a job and save up or go part-time. I don’t know how student loans work in the US, but if he’s living independently from his parents can’t he apply for loans? (I know, student loans suck, I have $40000 worth of them).

My parents footed the bill for my undergrad, though I helped out with a ton o scholarships. My grandfather’s inheritance helped out with graduate school, and there was enough left over to allow us to purchase a new car for myself and my fiancee when her car (i do not own a car) broke down after 11 years of use.

I agree, just blindly handing money over does not set good incentives. But education pays forward, and I think its proper for a parent to pay for, at least, an undergraduate degree at a good public school.

Growing up, my father always told me he would pay for my tuition, room, and board when I went to university. He did that for my siblings. But in my case I got a full scholarship so he paid nothing for tuition, my rent was paid for by social security (my mother died when I was 8, and I received $100/month benefit checks when I turned 18, just enough to cover my rent), and he only gave me $50/month for food. I used to think he was being stingy (I did manage to survive on $50/month for food but I was awfully skinny) but as time goes by I’ve come to think he did me a favor by forcing me to fend for myself. I worked during the summers and saved so I could eat a little better year round, and took on odd jobs during the school year to help make ends meet. Despite being a millionaire, he left me just $5,000 when he died. But again, after some initial resentment, I think that was the right thing to do. I have the satisfaction of knowing that I made my own way in life.

Great post. My sister happened to marry someone who’s grandparents are quite generous with money, and they have some undisclosed large sum in the bank. Sometimes it seems unfair to me–they just bought a brand new car (ack, brand new!)–he works an okay job and she stays home with the baby. I worked hard, did well in school, and earned myself a good job, and still have student loan debt to worry about. But overall, I think it’s more of a blessing than an curse. If they can afford a new car, why not? Without that money, she wouldn’t have the choice to stay home with my adorable nephew. Really, it isn’t fair, but no one ever said life was.
I hope to help my kids somewhat with college, but maybe something more along the lines of matching funds. Since I don’t have kids, I have a while to decide! Really, it’s a personal choice–the recurring theme of “do what works for you!” But if my (hypothetical) children feel “entitled” to parental funding for education, then I would think I did something wrong.

Parents don’t owe their grown children a graduate education. They don’t owe them an undergrad, either, but that would be hypocritcal of me–my parents paid for my entire college education with one (strict) caveat: I had to go to a university affiliated with their church, in which I was raised. I used to think this was completely unfair, but looking back I see they were just putting their money where their mouths were. I got as good an education as I would have anywhere else, and since it was a smaller environment, I had opportunities I would not have had at a larger public university (I was editor of the newspaper, for example). They only paid for school and did not give me money for anything else. I worked throughout college for money for gas, insurance, clothes, food and at one point rent (most of the time I lived in the dorm, because they would pay for that). I graduated with a pretty solid degree and no student loan debt at all, which freed me up to move across the country the week after graduation and follow my dreams. I couldn’t have done it without their financial help with school–and I couldn’t have done it if they’d given me money for everything else, paid for my car insurance or cell phone, or otherwise crippled me by not letting me learn how to take over my own financial life.

I’ve seen the effects of these helpful parents on some of my friends, and it’s not pretty. Those who think money falls from the sky (or their parents’ pockets) will not learn to manage it, because why should they? I’m going back to grad school this year, and it hasn’t even crossed my mind to ask my parents for help. I’m not sure what they’d say, but it doesn’t matter–they did their duty by me, and gave me the tools and skills to make it from here. (For what it’s worth, I also hope I don’t get an inheritance from them. I hope they spend every last penny on themselves in their old age, because postcards from their trips to wherever they want to go will mean more to me than a bank account number.)

If the situation is such that the parents have and are willing to give, but don’t wish to foster neediness, my parents had a solution. They would match my savings.

For example, I had 4k saved for a car when I was 16. They matched me and I could buy an 8k car. By 18 I had saved 10k for college. In this instance my parents paid the rest, citing it as an investment in my future, but all along my understanding was that every dollar I had would be matched for my education. It gave me a strong incentive to not blow my money on basketball games, movies, etc, and my parents could give without worrying that it was enabling bad spending habits.

Interesting post. With two kids in elementary and middle school, I’m constantly bombarded by advertisements telling me how much I should set aside for my kid’s education, 529s, etc. My parents struggled to make ends meet and I paid for my own college and (I think) turned out all right.

Am I being brainwashed into thinking I need to fund 100% of my kid’s college and, yikes, graduate school?

If they have the money and are willing to pay, by all means, they should. If I had millionaire parents, Iâ€™d probably expect them to pay for my college education. Let them throw some caveats in, some stipulations, etc, but when it came down to it, Iâ€™d expect them to pay for the parts I couldnâ€™t come up with through scholarships and reasonable effort toward putting some money into it myself.

Working 30+ hours a week and going to school full time isnâ€™t fun, and for some itâ€™s the only way. I worked my entire way through school, and with most help through scholarships, a little from parents, and part time work sometimes exceeding 30 hours a week, I made it out on the plus. I didnâ€™t learn anything special that I wouldnâ€™t have learned had I not worked through school. I donâ€™t feel any special sense of reward of job well done that my peers who had school paid for didnâ€™t. But I never really doubted that I couldnâ€™t do it, so in the end the confirmation of my ability really was not reward enough for the extra effort. Youâ€™ve got the rest of your life to work, why complicate things when you donâ€™t have to. The difference is that I donâ€™t blame anyone, I didnâ€™t expect my parents to pay, and because I knew this was my only way, I accepted it with open arms. However, had my parents had accounts overflowing with money they could have used to pay and didnâ€™t, I would be questioning their decision.

I do agree that the expectation is the problem with kids who feel they are â€œentitledâ€ to the money, and in most cases this does lead to abuse. They canâ€™t fend for themselves, they donâ€™t know the value of work, etc etc, but this is a problem not with gifting in general, but the trends and ways the parents go about giving money. There is a big different in giving your kid a credit card tied to your account and paying the bill every month, and paying for a college education. Parents should be looking out and investing in their childrenâ€™s future, and this is one of the foremost ways to accomplish this.

Just as a quick counterpoint to the “the children of the rich are indolent and irresponsible” trope, I was given $6,000 by my parents in January (they basically think my entry level-salary means I’m living in penury). I slapped $5,000 of it into my Roth (finished my 2006 contribution and maxed out 2007) and put the other $1,000 in a high-yield online savings account for future travel. I haven’t spent a penny of it. I live scrupulously below my own means–I save nearly 20% of my salary in addition to saving 100% of gift money.

Here’s the thing about expectations, though: they’re set up. I grew up expecting that my parents would fund the entirety of my undergrad education (which they did, at a private school, out of pocket) because I grew up with the knowledge that college was not optional and that it was my job to get into a top-tier school. I don’t expect they’ll fund my PhD because they always told me that I was on my own for grad school. But what about this monetary gift? I don’t know if it will be repeated because we never discussed it. The boundaries here are unclear. Does the gift recur until my salary clears some particular figure? Does the gift decrease as my salary increases? Was it just a one-time post-graduation thing? I probably won’t know ’til January. And frankly, that leaves me hoping that it will recur. I like money; I like using it for travel and investing. I know that on my salary, I won’t be able to max out my Roth for 2008 if I don’t get gift money from my parents, and I want to max out my Roth. Can you blame me?

A lot is given to one when one is the child of wealthy parents, and I don’t think it’s necessarily a sign of weakness of character that one can get used to it–one always gets used to things, it’s an essential human coping mechanism (“normalization”). I think the whole “sense of entitlement” issue can be avoided if wealthy parents are very, very clear to their children as to what financial contributions the children can expect from their parents. It is confusing to wait and wonder what my parents are going to want to cover and what they’re not going to want to cover. It makes it hard to plan. So I probably do come off as having a sense of entitlement, sometimes, in that there is always in the back of my mind the idea that maybe some goal, need, or want will be taken care of by my parents’ generosity. Thing is, though, this idea reflects fact: it might. It’s the might, I think, that leaves me, and the Metafilter poster too, perhaps, needing to ask, “Is it reasonable to ask for [X]? Is it reasonable to hope for [Y]?” in a way that reads as entitled.

On some level, I think one has to be really careful that the whole critique of entitlement thing doesn’t teeter over into the realm of sour grapes. I do think there are things wealthy parents can do to keep their kids “unentitled” (mostly: be very clear about financial contributions, work hard to instill a sense of perspective and a work ethic), but will that kid still bother the people who object to “entitlement”? Or is the real problem with the fact that that kid has material advantages, and that doesn’t sit well with us on an instinctive level?

With regard to undergrad, I see advantages and disadvantages to parents footing the bill or helping out substantially. On the one hand, it’s good for kids to develop a sense of financial independence, and work to pay their own expenses. But if a student is taking 3-5 classes and works 20-35 hours per week, s/he doesn’t have much time to study appropriately, read widely, and develop culturally. I see this where I teach now: many students are merely taking classes; education is not (and cannot be) their focus because they’re too busy working, etc.

When parents foot the bill, this allows the student not only to do the proper amount of work for classes, but also to participate in clubs and events and to develop real relationships with other students. (Of course, many of these students still neglect the coursework part….) But many of these students don’t develop a firm consciousness about money and finances. I was one of these students.

Ultimately, I think the best scenario is for the parents (or whoever/whatever) to foot as much of the bill (tuition, etc.) as possible, with the student working no more than 15 hours per week in order to cover some responsibilities. This allows the student to be primarily a student, but also allows him/her to participate in the financing.

I think grad school is a bit different. If the student is in a program leading to a relatively high-paying career (law, medicine, etc.), loans will probably suffice (and I don’t see anything wrong with parents loaning the money, with expectations of repayment).

If the student is in a terminal-degree program leading to a relatively medium-paying career (PhD in most fields, Journalism, Culinary School), it’s best to enter programs that offer tuition remission or teaching assistantships that offset tuition and other costs. Otherwise, the parents may wind up paying more than the student will actually earn in aggregate! Loans can be helpful to finance such ventures, but if the career doesn’t yield the income to offset the expense, it isn’t financially practical. I know a couple of people who took out loans of over $100,000 in order to get grad degrees in the humanities, and they’re now making ~40,000/yr and still paying off the loans. But then again, they are doing what they love (I hope). For some, the burden of heavy loans and a perpetually low net worth are made up for by career and lifestyle satisfaction.

Ultimately, I think the issue of parental involvement in grad school depends on specific circumstances. I know a couple who laid out thousands of dollars to help their two sons get grad degrees in medium-paying careers (PhD in English, and MA in Journalism), because these were the careers that the sons wanted to enter, and the parents had the money to give. As far as I can tell, the parental support hasn’t harmed anyone involved, as the sons are in good jobs, and the parents have plenty to live on. Sometimes the best economic decisions are not the best life decisions.

Some great comments so far. I don’t have much time, but I wanted to offer a quick reply to echris, who wrote: Am I being brainwashed into thinking I need to fund 100% of my kidâ€™s college and, yikes, graduate school?

I think a tax-advantaged college savings program is awesome, and if I had kids I would use one to save for their college education. However, I might not let them know the extent to which I was able and willing to contribute to their cause. I’ve read many places — including The Millionaire Next Door — that it’s best for wealthy parents not to disclose how much money they have for fear of creating expectations in children.

As always, do what works for you.

@English Major
Great comment. I especially like: I think one has to be really careful that the whole critique of entitlement thing doesnâ€™t teeter over into the realm of sour grapes

This is absolutely correct. There’s nothing wrong with parents helping children if they can afford to, and if the children don’t become accustomed to the help, or use the money for consumption. But, as Stanley and Danko show, too often adult children of wealthy parents become addicted to the Bank of Mom and Dad.

I personally got 1.5 years of university paid for and cutting me off was a good idea. I dropped my spending by $1000/year (or 10%) when it happened.

The other side of the coin is that paying off student loans while getting started in life is a huge drain on your limited resources. So I feel I want to provide something to my own kid’s education to ease this pain.

So what’s the solution? I’ve been using any government benefits I receive for the kid and any gift money for the kid and depositing it in a Registered Education Saving Plan (RESP) which is a tax deferred saving account in Canada. That money will be used to partly fund the kid’s education, after that I’m not worrying about it. After all it is also in my kid’s best interest to ensure I’m financial stable in retirement to ensure I don’t become a drain on the kid’s resources as I get old.

Very interesting post. If I’m not mistaken, the parents would feel obligated and the child would feel entitled.
I enjoyed trying to see this from the point of view of the parents. It is interesting to hear different strategies that parents have used with commenters.
My basic question is what is the point of being so wealthy if you don’t plan on sharing the wealth with your children? Everyone will make their own decisions, but take Bill Gates, he may be giving to charity but he is able to wield immense power with his gifts. There is a benefit directly to him in being a very powerful person. If he were to let his children take out student loans, I wouldn’t think better of his parenting.
In terms of education, and loans, I think the level of loans needed for higher education is a disgrace. I understand the reasoning behind it, you are the primary beneficiary of your education, not “society.” But costs have risen very high very quickly. And most people entering college have a very hazy idea of the value of the money they are taking out loans for. I just can’t imagine, if I were wealthy, not offering to make any contribution to my child’s education, even a graduate degree.
For the original writer, maybe the graduate program is not the most lucrative, is not going to open up the imagined doors, but family should also try to help the letter writer understand that.

The original questioner to the metafilter asked whether they were out of line to expect help. On the basis of the information that they provided, I would say probably.

If parents gave limited help for undergraduate, they are unlikely to give more and likely to give less for graduate school. Any expectation of help is probably misplaced.

I think the parents should help if they have led the child to believe that they will and they can afford to. If they truly value education then they probably should help – not necessarily in financial ways – as an expression of their values.

In general, I think there is an easily discernable difference between economic outpatient care and being generous to your kids. The only problem is that parents giving outpatient care don’t see thats what they are doing.

I find these comments hard to believe….how many doctors, lawyers, and chiefs pay for their own education? I’m sure that they (those who pay on their own) are out there….but it’s amazing how many of these professionals come from wealthy families….wake up guys. The money just doesn’t arrive out of nowhere.
Unfair, sure is. But it’s real, and to keep the Horatio myth going is misleading everyone.

I view obtaining an undergraduate education as a necessary prerequisite for the vast majority of young adults graduating high school today. Thusly, I think there is some parental responsibility in ensuring that your offspring are able to fly away on their own.

So, I have the view that if a parent has the financial ability to support their child going to a good public instiution (in-state), they should. If the child wants to go elsewhere that doesn’t meet that criteria, he/she can pay the difference, either by working or with loans.

I left graduate school without 1 cent of debt. Now, I wasn’t allowed to slack off, and it was expected that I work during my education for my living expenses, which was fine. I didn’t mind, especially since I saw my friends leaving with 50K in student debt, and that I left with cash in the bank.

That’s a huge head start in life to give your child.

However, be careful how the agreement is spelled out. Since I worked a full-time cube w2 job and 2 nightime odd-jobs (great paid study time basically), i earned a good income which I promptly blew on the weekends or on spring break trips. My father in particular is still upset with how I spent that money (he contends) recklessly (though there are many issues here that support my case that I wont get into).

When I went away to college I was responsible for all my living expenses. That included apt or dorm room, car, food, clothes and so on. I was also supposed to try and get scholarships/loans that would cover my tuition. However, they would cover any part of the tuition that financial aid did not.

This taught me to be financially responsible, but it also made sure I didn’t drop out due to lack of funds. With the high price of most schools, I think this was a great way for them to help without making me too dependent on them.

Marsh wrote “how many doctors, lawyers, and chiefs pay for their own education?”

It would be interesting to see statistics on that; my impression is that a lot of them do. My girlfriend put herself through law school with no help from her family, and I have friends who are doctors who did the same. A lot of MBAs got their degrees with loans or savings. Sure, there are a lot of doctors and lawyers from wealthy families, but I don’t think it’s as prevalent as it used to be.

The Ask Metafilter thread already includes my personal situation. I feel parents should help to offset the costs of their children’s education. This doesn’t have to mean a free ride. But most families can afford to contribute something.

I don’t agree with this sink or swim attitude. The problem is that most of society continues to support children. Not only are you forcing your children to live in poverty, but you’re also forcing them to go without valuable social connections.

My parents made just over the cut-off for student loans in Canada. They refused to offer financial support. Even though I graduated in the top 3% of my province and had won scholarships, I couldn’t afford to go to university. I’d been saving my allowance, babysitting money and part-time job earnings since I was eight years old. But I didn’t have enough to pay for residence, groceries, transportation, books and the like.

It took me six years to finish my undergrad. I had to alternate work and school. I lived on less than $500 a month in the mid-1990s in one of the most expensive cities in the world. I couldn’t afford to go for coffee in the student cafeteria, have a beer in the pub, go to the odd movie or do any of the normal social activities. I struggled to find funds to socialize with the poor kids, since their student loans gave them more money than I had — and they were getting non-repayable grants, too. I couldn’t even get a non-student loan because I didn’t have parents willing to cosign and I was too young to have a credit rating. In fact, my bank wouldn’t even give me a credit card when I asked for one, because I didn’t have a student loan! So I had no way to build my credit rating. After a couple of years, I asked them about a secured credit card and they gave me one with a $500 limit in exchange for locking $600 into my bank account. Of course, that also meant I had $600 less to pay for food that year.

From a health and safety standpoint, I was in a rough spot. I lived in firetraps, bug-infested apartments, slummy neighbourhoods and the like. I’m not talking about your basic student apartments. I’m talking scary. Of the $500 a month I had to live on, $300-$350 went to accommodation, $54 to a bus pass, $100 to food and the balance to my phone bill.

Because I constantly interupted school with work, worked when I was going to school and took night classes when I was working full-time, I couldn’t build the social relationships that university is known for. This made it extremely difficult to network when I graduated. I managed to work hard in my career and move forward. But, even when I graduated, I still had to rough it. I had to save everything I earned, because I had no financial safety net. And that made it very difficult to do the kind of after-hours socializing required by business and middle class life.

I can see not paying for graduate school. But I think parents need to make sure their children can live in safe environments, eat healthily and survive during their undergrad. Why on earth would you want your child to live on less than a welfare recipient gets? You should be able to see your child’s financial habits early on. I can’t imagine most 8-year-olds are saving their own money for college. I mean, I essentially didn’t spend any allowance, babysitting money or part-time job savings when I was growing up. Even in 12th grade, I set aside $20 a month for social activities…which had to include my graduation, prom, dances, date money and so on.

That’s why I don’t agree with refusing to help your children with university. I can see not paying for the whole thing — I’m not going to cover the whole shot for my kids — but you don’t want to put your children at a terrible disadvantage.

No. After 18 years I don’t think parents owe children financial help. And I agree that if they didn’t help with ugrad it’s unlikely they are expecting to be tapped for grad school.

I got enough scholarship money for ugrad to not work, but I don’t think that did me any favors in terms of work ethic. I spent the first part of grad school just learning to work hard. PhD programs can be a lot like an extended childhood with profs training and socializing students. The more one is responsible for thier own money the better able one will be to be an adult despite your schooling. If the finances are unbearable independently, perhaps one should forego graduate school. The sciences generally support their own students. The humanities may or may not, but the return on investment from a humanities degree isn’t sufficient to warrant the debt incurred.

@ Marsh, could you elaborate on the Horatio myth? My family is now solidly middle class to upper class now, but rewind to the 1960s and they were fresh off the boat immigrants with literally the shirts on their back. Actually, I’d say it was pretty tight through the 80s even.

I don’t have much to add to this discussion because other than watching friends, and other than taking a job at the family business, I have little first-hand experience with this. Kris and I do not have children. My family was too poor to give me direct financial assitance. True, my parents gave me a few hundred dollars over my four years at college, but that was it.

I knew at an early age that my parents would not be able to help me with college. I also knew that I was going to go to college, no matter what. You might think I would have saved money, but I didn’t come from a family of savers. The thought never occurred to me. I did, however, come from a family of hard workers. So I took another approach: I studied and applied myself so that I could get scholarships. It worked. I attended college on a full-ride scholarship. (I’ve mentioned before, though, that I think this actually had some drawbacks, and helped exacerbate my financial failings.)

I do think it’s a good idea for parents to try to support their children, especially with education. I just don’t think it’s a good idea for either party to become accustomed to “economic outpatient care”. There’s a fine line, and I don’t know exactly where it rests. (It’s probably different for each family.)

Did you need to move away from home to go to school, JD? That’s the problem I had. I don’t think most (non-private) universities have unbearable tuition costs. But, if you have to fend for your own living expenses, it’s pretty hard. And young women rarely have the job opportunities young men do — I couldn’t get general labourer jobs or even sales jobs.

I grew up with the Bank of Mom and Dad, or rather the Bank of Dad’s approval. My parents and grandparents contributed money towards both my undergrad and grad schools. I did receive help from the state for tuition, books, and transportation for both schools. My parents wanted me to focus on school only and therefore felt the need to pay for my schooling, boarding, food and bills. I had a year gap before I went to grad school and during that time I held a job (that helped me get into my field). My father told me that half my paycheck would go into savings for schooling. I obliged with no complaints for that made sense to me.
My choice of going to grad school had a steep price because I chose to go to a private university for my Doctorate’s degree. When I got accepted to my degree program, I decided that it was my responsibility to take on some of the finances for my education. I was able to pay for the amount that financial aid suggested I should put down, I applied for student loans and I also received some help from outside sources. I used the checks that my grandparents provided as well as money and gifts received from graduating undergrad to pay for my first year of grad school. My parents still provided financial assistance for housing, food and bills.
Now that I am out of school, I have my loans to payback. I no longer rely on my parents for financial help since being married. Although, I am appreciative for the financial help through schooling — I also got some bad financial advice from my parents and also strings attached. Now, I am slowly trying to break some traditions (such as giving money to my cousins for their HS graduation) and for my parents to see that we (my husband and I) are able to make sound financial decisions that are right for us.

Really good comments going on here. I was brought up with the expectation of my parents’ full support for my undergraduate degree, which I received. My parents paid the full out-of-state tuition so that I would not have to worry about working a job to gain residency. However, I was also raised with a sense of self-worth and discipline, so I did work summers (excluding summer after freshman year), and what I earned went towards living expenses the following year (and a select few “luxury” expenses).

My parents also encouraged me and my siblings to pursue further education (i.e. medical school. I’m in grad school now, but not medical). Continuing the sense of self-worth, I myself made the decision to fund my own graduate education. This has been difficult, especially being a small growing family.

To show my diligence, we lived on spouse’s part-time work, my asistantships from school, and some federal loans for a year. I then showed my parents a budget indicating how I could use a $10,000/year loan. They were more than happy to provide that amount, interest-free for life. It’s family money, and in my view, it’s to be repaid as soon as practical. But, as it’s family resources, eventually it will be inherited. Better to spread it around than to have to waste it on interest paid to a third party.

I hope as a parent to be able to afford not only such financial support but also disciplined upbringing to my children!

I had no financial assistance from parents but financial aid and scholarships (came to me “too easy” probably) probably contributed to my early departure from college. I had health issues- so I may have dropped out anyway. I don’t know.

I worked ( legally) from the time I was 14 and had a full-time summer job, but I spent my first year in college living off financial aid and scholarships- renting an apartment, getting a lot of take-out,etc.

My best year in school I had to pay out of pocket because I was ineligble for aid ( too many WDs lowered my completion % for continuing aid). I worked 7 days a week that year as well.

As far as my role as a parent when I have college-aged children- I think I will offer Full Room and Board. My offer of Full Room and Board will consist of: keeping their room in my house and eating whatever food I prepare/buy. There are plenty of good universities within driving distance, and unless they have a specialized major that isn’t available, I doubt it will hurt them any to go to State U.

Most of the commentary is from the perspective of adult children, probably reflecting the age of people in the blogosphere. I come at this from the perspective of the parent running the bank. How do you share your resources with your adult children, reinforcing responsible financial decisions, without undermining them? I consider (a lesson learned from the Millionaire Next Door) over-funding to be undermining for all the reasons JD outlined. On the other hand, what is the point of having money, not giving any to your kids when they are young and working hard, and then leaving it to them when they are mature and don’t need it? That is a fairly common pattern.
For us the answer is to be open about money, give some $ with no strings attached so our kids can have experience deciding how to handle it, giving lots of advice about investments et al, but not being judgmental.
If we were to help finance our kids’ graduate school (we cover private college tuition and board in full, but not college spending money for all the reasons I’ve mentioned above), we would do so with very clear guidelines, terms, and expectations. As in parent/child relations in families of all incomes, communication is essential to healthy interaction.
One last thought. I think helping with Roth IRAs is a great idea for parents or grandparents who want to reinforce responsible financial behavior. You are essentially doing a “matching fund” which rewards work, way different than giving bail-out cash. I wrote about this:http://moneychangesthings.blogspot.com/2007/03/road-to-retirement.html

I grew up in a single-parent middle-class household in an otherwise extremely wealthy suburban neighborhood. All of my friends had their college educations paid for, and most of them had their living expenses covered as well.

I knew from age 13 or so that my mom couldn’t afford any of that, so I did what I had to do – flipped burgers, drove a 20-year-old car inherited from my grandma, and graduated with good enough grades to get most of my undergrad expenses covered by scholarships. I graduated college with $0 debt and $15K for a down payment on a new car.

It seems to me that even wealthy parents could lay things out clearly as to what kinds of financial support they should expect for higher education – at least for me, when confronted with going into debt or coming up with my own money, I obviously didn’t want to choose debt.

One thing that hasn’t really come up in this thread is college savings plans. In Canada, there are huge incentives to save for education. As a parent, I could not help but leap at the 20% grant the government contributes for the first $2500 (was $2000) every year. If your income is lower, you can receive up to a 40% grant. And, if you’re fairly low income, your children can each get a $500 bond to kick off the plan. All the funds grow tax-free, until redemption. And then they’re taxed in the hands of your child, who probably isn’t earning a lot.

I’m a parent and I strongly believe in supporting a child’s education. However, I will not pay for the entire education. And I’ll leave it up to my children to decide what they want to study. If I decide to hold back some of the money, I may still make it available as a low-interest loan…but my husband and I would be stupid to give up the grant (and its growth) in the meantime.

I remember watching a Suze Orman show about money, and funding your retirement in specific reference to your children’s education. Her point was this – if you fund your child’s education, at the expense of your own retirement, you aren’t doing either yourself, or your children, any good. Your kids may have to take a different path anyhow if you can’t afford to look after yourself say if something horrible happens to you and you aren’t covered. How useful will that education be, if they are in 3rd year, and you can’t pay your medical bills? I thought it was a very weird and selfish way for her to put it, but it started making more sense as she continued. If you have been a good parent, and have given your kids the tools to make good decisions, then they will be successful in whatever path they choose: if that is an undergraduate education, then fine. If not, and they can make a living, that is fine too.

She went on to say that sure, if you can pay for your own retirement and expenses, and have money left over, make sure your kids get educated, but don’t do it in such a way that it is an expectation – make it something they have to work for.

Take me for example. I was always under the impression that my education would be paid for. Problem was, when I was in grade 11, my dad got hit on the head at work but our work insurance refused to pay him any money. So my folks lived with no income for pretty much two years: luckily they were smart about how they saved, and they were okay. But there went my education money. I had savings for a bit of time, and I had scholarships, but with all the upheaval, I soon realized it wasn’t a good time to be in school. So, I moved back home. Long story short, here I am, 30 years old, and I’m just finishing my undergrad now. Sure, I know people that finished theirs 10 years ago, but I couldn’t.

That was a lame life lesson that I had to learn, but it sometimes is the truth. Sometimes, you just CAN’T! You can’t buy the new car. You can’t take the vacation. I’ve had to tell myself that over and over again – comparing myself to my friends whose parents didn’t go through as rough a time as my folks – and when it comes down to it: sh*t happens. But, through it all, the biggest life lesson I’ve learned is resilience. I think that is more valuable than any post-secondary education.

Of course, every family is different and every situation is different, no correct answer for all.

My parents, both college professors, always made the assumption that both my brother and I would go to college. As a result, I always made the assumption (actually I never thought about it much at all) that my parents would pay for college and they did. My brother didn’t go to college and my parents after a couple of years gave him the money they had saved up for him to go to college. He invested that money in his own business which eventually failed. But, he started another business and he is quite successful. I worked a part time job during college (less than 20 hours a week, more like 10) to cover spending money and sorority dues.

When it came time to go to professional school I assumed I would pay for the whole thing myself.
But instead my Mom gave me a good size chunk of money from her father’s estate funds, I received a scholarship that covered about half of my tuition, I worked part-time, took student loans and my grandparents helped with living expenses. I paid my grandparents back and I quickly paid off my student loans.

When it came time to buy my first house my Dad helped me with the closing costs. I paid him back as well.

My husband and I don’t have kids yet, but if and when we do I assume that we will pay for their undergrad expenses.

I do think its important to help kids establish a work ethic and a savings habit. I think many kids today are spoiled and as a result will struggle when they become adults.

I also think its important for parents to take care of their retirement funds before funding their kids’ college costs.

I believe that children should first graduate from the school of common-sense and self-reliance (taught and demonstrated by their parents). Self-reliance is an essential part of a homesteading lifestyle and I feel that it encourages individuality.

In the case of parents footing the tuition, I believe that this encourages laziness and does not promote the competitive spirit that is required to live (not just exist). Like it or not, life is competitive on just about all accounts. If person does not understand hardship and has not had to deal with it at an early age, they are less likely to conquer hardship later in life. Without experience, it is quite difficult to fully understand hardship, as most college don’t have a course entitled Life’s Hardships 101 or 102.

Becoming an individual is learned by the journey and not by the end result. Parents should discuss with children about the goals of a college education. College=job=happiness is not something that should be encouraged. Case in point: My father was coal miner and was the sole bread winner for the family. I was neither discouraged or encouraged to go to college, but was told that whatever I decided to do in life, make sure it was something that was practical and enjoyable. I worked in a grocery store during the week after school and in a rock quarry on the weekends. I decided that after high school I would go to college and become a chemical engineer. Got a student loan, scholarships. Mission accomplished. Got a well paying job and I thought I was happy. The job stole every shred of happiness and dignity from me. I finally got tired of feeling like machine with no thoughts or feeling, quit my job, sold my house, bought a small farm. The results are amazing: lost 50 pounds (I actually have to do something physical now!), breathe fresh air, and sleep well.

If you want to give your child a gift, let them make the choice to go college. If they really want to go, they will find grants and loans to make it happen. If they are unwilling to do this, college won’t be able to teach them motivation! Let them finish college and pay off their loans. When they finish paying for loans, offer to give them, as a gift, the same amount of money as the loan they just paid. More than likely, if you did your job as parent, they will refuse any money from you and thank you for giving them something college or any monetary gift could not give them: wisdom and experience.

My parents paid for my undergrad degree 100%. Now that my youngest brother is in college, my parents cannot afford to help him. They are “pressuring” me to help him out. I can’t exactly afford it but it makes me feel guilty. I don’t think he cares either. He has a small scholarship and part-time job. What should I tell my parents?

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My name is J.D. Roth. I started Get Rich Slowly in 2006 to document my personal journey as I dug out of debt. Then I shared while I learned to save and invest. Twelve years later, I've managed to reach early retirement! I'm here to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you get rich slowly. Read more.

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